Fears for car market amid loan mis-selling

Experts are concerned that customers are being sold new cars using finance deals without having the terms properly explained to themCHRIS RATCLIFFE/BLOOMBERG VIA GETTY IMAGES

Britain’s £40 billion car finance market could be heading towards a mis-selling scandal because of concerns about the reliance on debt to buy vehicles.

Nearly 90 per cent of new cars are sold using finance deals, most of which mean the owner in effect leases a vehicle for three or four years rather than buys it outright.

These so-called personal contract plans (PCPs) allow people to secure cars for monthly payments, helping to cause a motoring boom. Experts fear, however, that many customers are being sold loans without having the terms properly explained to them.

Analysts suggest a financial downturn could result in thousands of drivers unable to keep up payments, leaving dealers with a glut of second-hand cars they would struggle to sell.